Stocks underwent further trends in futures trading Sunday night, with investors and economists struggling to cope with the rising possibility of a severe recession caused by President Trump’s major new tariffs on imports.
Futures for the S&P 500, which allows investors to bet the index before formal trading on Monday, fell by about 4%. The 10.5% drop in the S&P 500 on Thursday and Friday was the worst two days for the index’s decline since the 2020 coronavirus pandemic.
Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said the only other two-day declines during the 2008 financial crisis and the 1987 stock market crash were in the 2008 financial crisis and the 1987 stock market crash. By the dollar, more than $5 trillion was removed from the value of Standard & Poor’s in the past two days.
What’s even more unusual is that last week’s sell-off stemmed directly from presidential policies. So far, Mr. Trump has raised concerns about market reactions and potential economic consequences, with little intention to back down.
“I think this is the biggest collapse in the market because it's purely Trump's self-inflicted,” said Dan Ives, a senior technical analyst at Wedbush Securities, warning that if the tariffs announced last week remain in place, they would provide China with the U.S. technology industry a decade later and provide a boost to China's art artificial knowledge.
“The economic pain these tariffs will bring is hard to describe,” he said.
Mr. Trump announced on Wednesday that historically high tariffs caught investors, economists and businessmen off guard and raised global economic forecasts.
The CEO has begun warning consumers that they should expect prices for certain groceries, clothing and other products to rise. Consumers say they intend to control large items. Some auto companies have announced production suspensions overseas and their lives are being killed at home. Bank economists have proposed a chance that a recession will hit the United States in the next 12 months. Selling in financial markets has accelerated as countries responded last week with their own tariffs.
Hedge fund manager Bill Ackman said on social media platform X on Sunday that he supported Mr. Trump's attempt to address global tariffs, but implored the president to call for “90 days” on Monday.
Otherwise, “we’re heading to a self-inducing nuclear winter and we should start working on it,” he said. “The likely colder head prevails.”
British Prime Minister Keir Starmer warned on Saturday that “the world we know has disappeared” and urged countries not to retaliate against the United States and launch a full-scale trade war.
Currently, the S&P 500 is now down 17.4% from its February peak, currently entering a bear market of course, defined as a 20% or more decline from its recent peak.
The NASDAQ Composite Index is full of tech stocks sold out last week, an acceleration in the sell-out, already in a bear market, down nearly 23% from its December peak. The Russell 2000 index of smaller companies, which are more sensitive to the economic outlook, fell 25% from its peak in November.
Still, some investors remain cautiously optimistic that a stable economy starting early this year will withstand high tariffs before the president turns to tax cuts and deregulation to stimulate the economy and avoid recession.
Treasury Secretary Scott Bessent said on Sunday that he saw “no reason” to look forward to a recession.
Other analysts warn that the damage to the economy will depend on the longer the tariffs are at higher levels.
“We are still very cautious,” said Stuart Kaiser, a stock analyst at Citigroup. Even if the decline last week, the market could fall further, as earnings and economic growth expectations “are much higher than the announced tariff levels.”
